If you’re an investor, you’ve heard about the importance of a properly diversified portfolio.
The accepted thinking has long been that investors should hold a balance of stocks, bonds, and perhaps some cash and alternatives such as real estate. If one asset class falls, the theory goes, chances are another will remain more stable or perhaps even grow.
But the 2008-2009 market crash showed that even a well-diversified portfolio can be vulnerable to deep losses. During the crash, virtually every asset class plunged in tandem, including asset classes that are not supposed to be strongly correlated.
I believe the lesson of that difficult period is that investors must expand their definition of a diversified portfolio. Specifically, portfolios should contain a solution that generates a steady return and is insured against market losses.
The best product for meeting those criteria, in my view, is customized permanent life insurance. With a specially designed policy, you can quickly build a cash value that generates a fixed rate of return. One option allows part or all of your cash value to track market returns, which means you can dial the risk and potential reward up or down as you wish.
Having part or all of your insurance cash value invested so that it produces a guaranteed stream of income can create valuable peace of mind if you are navigating through uncertain markets toward long-term goals.
There’s another important benefit to using customized permanent insurance as part of your portfolio. Policyholders are able to borrow against their cash value to finance everything from new cars to retirement—without relying on banks. And because you are technically borrowing from the insurance company rather than taking the money out of your account, your account balance will continue to generate interest or potential market growth. Furthermore, the permanent life insurance policy provides a death benefit to your beneficiaries.
I believe that stocks and fixed income will continue to play an important role in a well-constructed portfolio, as will carefully thought out real estate strategies in some cases. But adding a permanent life insurance component can help to smooth out the market’s ups and downs so that you reach your goals more efficiently and with less worry.
If you’d like to learn more about using permanent life insurance as part of your overall investment portfolio, contact us for a meeting and to receive a complementary copy of my book The Private Vault: A Guide to Building Tax-Free Income in the New Economy.
